Some Options to Avoid when Facing a Financial Emergency
When facing a financial emergency there are at least six options that you should avoid.
- Don't borrow from a finance company
- Don't use a tax refund anticipation loan
- Don't take out a payday loan
- Don't visit a pawnshop
- Don't refinance your car
- Don't use a debt consolidation or debt negotiation company
Don't borrow from a finance company.
These companies make secured consolidation loans that require you to pledge real or personal property as collateral at high rates of interest, often as high as 15%. If the finance company makes an unsecured consolidation loan to you it may carry an interest rate as high as 25%. If you must take out a consolidation loan you are far better off borrowing from a bank.
Don't use a tax refund anticipation loan.
While a tax refund often provides a good source of ready cash, the cost the tax preparer charges for the service is often too high to justify the rapid infusion of cash. You are always better off to be a little patient and wait for the IRS to send out the refund check. The difference is often less than one week's wait.
Don't take out a payday loan.
The payday loan industry is a rapidly growing source of quick cash. The payday loan is illegal in many states but if it is legal it is a very expensive way to borrow money. The fees charged are quite high and mount quickly if you are unable to make timely payments.
Don't visit a pawnshop.
Pawnshops work by taking your property, whatever it might be and in return the pawnbroker lends you from 20% to 60% of the resale value of the property pawned. If you don't reclaim the item within the agreed upon time frame, the pawnbroker becomes the owner of your property. In order to reclaim your property you pay back what you borrowed plus a fee that can be as high as 30% of the money you received as a loan. The average pawn provides only about $50.00 in cash for which you might pay back $65.00 to reclaim your property. Not much value there.
Don't refinance your car
Sometimes called an auto title pawn or a tax anticipation loan 2018 in some areas, you are borrowing against the value of you car. Unlike borrowing from a bank, the title loan company charges around $25.00 per $100.00 borrowed. This works out to an APR that is around 300%. WOW. If you must use your car as collateral, go to your bank.
Don't use a debt consolidation or debt negotiation company
Debt negotiation or debt consolidation companies produce generally poor results. You will be charged excessively high interest rates of very high fees, put your credit rating in deep trouble and see very little for your efforts. This practice is either highly regulated or illegal in most states. If you must negotiate with your creditors you are better off doing the negotiating yourself, save the fees, and make the agreed upon payments directly to your creditors.
So there you have it. Six solutions to avoid when seeking to ease a financial emergency.
Copyright © 2007 Roger Passman All Rights Reserved
Roger Passman is the President of WDC Financial Services, Inc. His firm works with clients to restore damaged credit, negotiate payment plans, and reduce debt. You can visit WDC Financial Services at [http://www.wdcfinancialservices.com]
WDC Financial Services also maintains a blog filled with information about managing financial obligations and more at [http://wdcfinancialservices.com/wordpress/]
If you are looking for a credit card you may visit [http://www.wdcgetcredit.com] for up to date offers of cards that help repair damaged credit.